The Dematurity Of The European Textile Industry


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The Dematurity Of The European Textile Industry

  1. 1. GOING AGAINST THE GRAIN : THE DEMATURITY OF THE EUROPEAN TEXTILE INDUSTRY 1 Fianti Noor , 2 Prof. Paul Smith, 1,2 Natalie Stingelin-Stutzmann & 1 Stuart Peters 1 School of Engineering & Materials Science Queen Mary-University of London (UK) 2 Department of Materials, Eidgenössische Technische Hochschule Zürich (Switzerland)
  3. 3. MULTI FIBRE AGREMENTS (MFAs) <ul><li>The European textile industry has been the object of industrial transformation since the 1970’s under MFA </li></ul><ul><ul><li>Protection </li></ul></ul><ul><ul><li>Restructuring and modernisation </li></ul></ul><ul><li>Result : </li></ul><ul><ul><li>Improvement of productivity </li></ul></ul><ul><ul><li>Continuous decline of employment </li></ul></ul><ul><ul><li>Declining market </li></ul></ul>
  4. 4. Productivity 1980-1994: EU-12 (1980-85: reconstructed data for Greece, Spain and Portugal), 1995-2003: EU-15 (Source: Euratex, 2004)
  5. 5. Employment
  6. 6. Employment Textiles Clothing
  7. 7. POST MFAs <ul><li>Abolishment of MFA (1 January 2005) </li></ul><ul><li>European Technology Platform for the Future of Textiles and Clothing (2004) </li></ul><ul><ul><li>Radical technological innovation </li></ul></ul><ul><ul><li>Improve long-term competitiveness of the sector </li></ul></ul><ul><ul><li>to reinforce the position of Europe as a leading global player </li></ul></ul>
  8. 8. Technology Platform
  9. 9. Industrial Reconfiguration
  10. 10. Potential Problems <ul><li>An old industry with deeply-embedded routines </li></ul><ul><li>Unfavourable structure </li></ul><ul><ul><li>95% are SMEs with limited research capacity </li></ul></ul><ul><li>Supplier-led innovation sector (Pavitt, 1984) </li></ul><ul><li>Require paradigm change </li></ul><ul><ul><li>technologies, production processes, understanding market demand, distribution systems, organisations and management </li></ul></ul><ul><li>Growing competition from LDCs even for advanced products </li></ul><ul><li>Rising complexity of process and product innovations </li></ul>
  11. 11. RESEARCH QUESTION Mature Phase Ferment Phase <ul><li>Standardized products, </li></ul><ul><li>production ystems, </li></ul><ul><li>technologies, </li></ul><ul><li>organisational routines </li></ul><ul><li>Mass markets </li></ul><ul><li>Declining market due to </li></ul><ul><li>intense competition </li></ul><ul><li>Cost-based competition </li></ul><ul><li>Largely involve process </li></ul><ul><li>innovations </li></ul><ul><li>Centralised organisation </li></ul><ul><li>Customised products </li></ul><ul><li>Under-developed production </li></ul><ul><li>systems and organisational </li></ul><ul><li>routines </li></ul><ul><li>Employing emerging </li></ul><ul><li>technologies </li></ul><ul><li>Niche and emerging markets </li></ul><ul><li>Performance/functional-based </li></ul><ul><li>competition </li></ul><ul><li>Largely involve production innovations </li></ul><ul><li>Decentrelised organisation </li></ul>HOW FACTORS Technology Market Organisation Internal External ?
  13. 13. <ul><li>Maturity is inevitable in the process of industrial evolution </li></ul><ul><li>Key aspects of the ‘maturity trap’ are: </li></ul><ul><ul><li>cost reduction </li></ul></ul><ul><ul><li>economies of scale </li></ul></ul><ul><ul><li>Static or declining market share </li></ul></ul><ul><ul><li>standardization </li></ul></ul>Industrial Maturity-Dematurity Framework Abernathy et al (1978, 1983)
  14. 14. <ul><li>Maturity can be arrested and, for some circumstances, reversed (de-maturity). </li></ul><ul><li>De-maturity has to be pioneered by ” innovations that change an industry’s basis of competition at the same time that it disrupts established production competence, marketing and distribution systems, capital equipment, organisational structures and the skills of both managers and workers” (Abernathy et al, 1983, p. 109). </li></ul><ul><li>The search for new concepts typically works its way back up through the same design hierarchy established by the evolution towards maturity which preceded it. </li></ul>Maturity-Dematurity Framework
  15. 15. Evolution of Technology Transilience High High Low Low Impact on production system Impact on market linkages De-maturity De-maturity Maturity Architectural phase Niche creation phase Revolutionary phase Regular phase Abernathy et al (1983)
  16. 16. Dynamic Capabilities Framework <ul><li>An attempt to unveil the foundations of long-run enterprise success in rapid environmental change </li></ul><ul><li>The firm’s ability to build, integrate and reconfigure internal and external assets to address rapidly changing environments </li></ul><ul><li>DC origins : </li></ul><ul><ul><li>Routinized behaviour ( e.g. NPD, TQC) </li></ul></ul><ul><ul><li>Creative and differentiated entrepreneurial acts </li></ul></ul><ul><ul><ul><li>Sensing and seizing opportunities through asset </li></ul></ul></ul><ul><ul><ul><li>and capacity reconfiguration </li></ul></ul></ul>by Teece et al. (1994, 1997); Teece (1986, 2007)
  17. 17. <ul><li>Dynamic capability defines the course of evolution of a firm as a consequence of chosen long-term competence development trajectory </li></ul><ul><li>Firm’s asset positions determine its competitive advantage at any point in time and its evolutionary path constrains the types of industrial activities in which a firm can be competitive </li></ul><ul><li>Organizational processes transform the capabilities of the firm over time. </li></ul>Dynamic Capabilities Framework
  18. 18. Framework Discussion <ul><li>Abernathy et al . ( 1978 , 1983 ) </li></ul><ul><ul><li>Built on the evolution of technology and market at industry level </li></ul></ul><ul><li>Teece ( 1986 , 2007 ) and Teece et al . ( 1994, 1997 ) </li></ul><ul><ul><li>A firm level study built on evolutionary and behavioural economics combined with creative and differentiated entrepreneurial acts </li></ul></ul><ul><li>Hypotheses </li></ul><ul><ul><li>De-maturity at firm level is a result of well-executed, well-organised dynamic capabilities </li></ul></ul><ul><ul><li>Maturity-trap is a consequence of under-developed dynamic capabilities </li></ul></ul>
  20. 20. Approach <ul><li>In-depth , longitudinal study to investigate the phenomena of maturity, de-maturity and maturity- trap in the textile industry in Europe </li></ul><ul><li>Multiple cases study </li></ul><ul><li>To address “how” question: </li></ul><ul><ul><li>Firm level study </li></ul></ul><ul><ul><li>Long-lived firms (over 125 years) </li></ul></ul><ul><li>To address “factor” question: </li></ul><ul><ul><li>Firm-specific and country-specific </li></ul></ul><ul><li>Comparative analysis </li></ul>
  21. 21. Case Study <ul><li>Italy – Marzotto, S.p.A </li></ul><ul><li>The Netherlands – Ten Cate, NV </li></ul><ul><li>Germany – Freudenberg Group </li></ul><ul><li>UK – Hainsworth, Ltd. </li></ul>
  23. 23. Process technology Weaving and spinning technology-OECD (2004) year OE-rotor spinning Auto ring frame Ring frame E.I Ring frame Jet Projectile Automatic loom Fly shuttle Self actor Mule Spinning jenny Hargreaves 1750 1800 1850 1900 1950 2000 0,01 0,1 1 10 100 1000 0,01 0,1 1 10 100 1000 Hand loom Mech loom Multiloom weaving Northrop pirn changer Development towards maturity Automatic, standardized machinery Require less skilled labour Weaving Spinning Spinn.wheel Working hours per 100m cloth Working hours per kg yarn
  24. 24. Process technology Trend in 1950-80 1925 1950 1975 2000 2025 0,001 0,01 0,1 1 0,001 0,01 0,1 1 Ring frame Auto ring frame OE-rotor spinning Trend in 1900-80 Trend last 2 observation Trend in 1900-80 Automatic loom Projectile Jet Working hours per kg yarn Weaving and spinning technology-future trend (OECD, 2004) Weaving Spinning Predicted innovative pattern Working hours per 100 m cloth
  25. 25. Product Technology 1940’s 1960’s 1980’s 2000’s Consumer Textiles Technical Textiles Functional Textiles Multifunctional Textiles Smart/Intelligent Textiles Fibre technology Processing technology Finishing technology Production technology Advanced materials and hybrid technology Smart production
  26. 26. THE EVOLUTION OF THE EU TEXTILE INDUSTRY <ul><li>Each country appears to follow unique pattern of industrial evolution </li></ul><ul><li>Therefore, the evolution is examined on country basis </li></ul>
  27. 27. CASE STUDY 1: ITALY and MARZOTTO, S.p.A
  28. 28. Turnover 2004 Employment 2004 Statistics
  29. 29. Statistics Sistema Moda Italia Textile & Clothing Sector
  30. 30. Statistics % of turnover 2006
  31. 31. Statistics: Technical Textiles
  32. 32. Innovative Characters <ul><li>Traditionally weak in R&D, high-tech industries including the chemical industry </li></ul><ul><li>R&D is not the main source of innovation in the textile industry but the purchase of machinery, design , and customer needs </li></ul><ul><li>Local/national equipment suppliers as the source of innovation </li></ul><ul><li>Competitiveness lies on its disintegrated structure, cooperate in networked clusters, mainly locally situated , to form flexible specialised firms </li></ul>
  33. 33. Evolution towards maturity Maturity <ul><li>A decline in number of firms and employment </li></ul><ul><li>A shift in power towards buyers </li></ul><ul><li>An increase in concentration </li></ul><ul><li>Forward integration to clothing manufacturing </li></ul><ul><li>Declining employment </li></ul><ul><li>Disintegration of structure </li></ul><ul><li>Declining employment </li></ul>A few large firms emerge as a result of mergers and acquisition Increasing number of vertically integrated firms Structural Change <ul><li>A wave of merger and acquisition in the luxury fashion industry </li></ul><ul><li>Relocation to North African and Eastern Europe </li></ul>A wave of merger and acquisition The beginning of competitive crises due to raising labour costs, obsolete plants and competition from the Far East Competitive Change <ul><li>Crisis hits due to MFA & competition from the emerging countries </li></ul><ul><li>Expansion to emerging markets (India, China, Russia) </li></ul><ul><li>Fast fashion </li></ul><ul><li>The rise of Italian luxury fashion </li></ul><ul><li>Market expansion for ready to wear to the US </li></ul><ul><li>Export textiles to the US </li></ul><ul><li>The beginning of Italian luxury fashion industry sponsored by large textile firms </li></ul><ul><li>Local couturiers began to gain market as French and English couture were unavailable during the war </li></ul><ul><li>Begin international market expansion </li></ul>Growing market as a result of unification of Italy (1860) Market Change <ul><li>A further increase in wages </li></ul><ul><li>Continuous decline of production, employment, and turnover </li></ul><ul><li>Abolishment of MFA </li></ul><ul><li>Inflation due to a sharp increase of oil price and labour costs </li></ul><ul><li>Reach the highest productivity in Europe but cause over capacity </li></ul><ul><li>Extensive restructuring following MFAs </li></ul><ul><li>The height of synthetic fibre production </li></ul><ul><li>Adopt mass-production technique imported from the US as a part of Marshall Plan </li></ul><ul><li>A leapt on productivity </li></ul>Adopt ring frame faster than other European countries Trend in the Italian textile industry 1990’s – 2000’s 1970’s – 1980’s 1950’s – 1960’s 1930’s-1940’s 1900’s-1920’s Year
  34. 34. Maturity-trap <ul><li>Transient economic misfortune </li></ul><ul><ul><li>Problems can be solved by re-enforcing the existing basis of competition i.e. speed of production and flexibility </li></ul></ul><ul><li>Did not see the decline as a consequence of permanent changes in demand, technology and competition </li></ul><ul><li>The label “Made in Italy” will remain the industry’s unique competitiveness despite growing production relocation and OPT </li></ul>
  35. 35. <ul><li>Local search & local preferences </li></ul><ul><ul><li>Business diversification to clothing and fashion brands </li></ul></ul><ul><ul><li>Favour local textile equipment makers as the main source of innovation </li></ul></ul><ul><ul><ul><li>Deter participation in global innovation networks </li></ul></ul></ul><ul><li>Favour process innovation than product innovation </li></ul><ul><li>Less developed technical textile markets among other textile industry in Europe </li></ul>Maturity-trap
  36. 36. MARZOTTO, S.p.A <ul><li>The largest textile manufacturer in Italy </li></ul><ul><li>Founded in 1836 in Valdagno, Veneto region as a wool yarn and fabric manufacturer </li></ul><ul><li>Expanded the business to flax and linen and yarns fabrics through acquisition in the 1980’s </li></ul><ul><li>Integrated forward to clothing and luxury brands in the 1980’s and 1990’s </li></ul><ul><li>Demerged clothing business in 2005, and subsequently concentrate on yarn and textile manufacturing </li></ul>
  37. 37. Performance
  38. 38. Innovativeness <ul><li>Amongst the first companies to adopt mass production technique in the 1950’s in Italy </li></ul><ul><li>The first textile firm in Italy that adopted “made in Italy” computer, ELFA 9003 </li></ul><ul><li>Amongst the first textile firms that integrated forward to clothing sector </li></ul><ul><li>Early adopter of the latest spinning and weaving technology </li></ul><ul><li>Relatively inactive in the EU research programmes </li></ul>
  39. 39. Patent
  41. 41. Statistics Turnover 2004 Employment 2004
  42. 42. Statistics
  43. 43. Innovative Characters <ul><li>Open for international collaboration </li></ul><ul><li>Opposition (together with Germany and Denmark) to the EU industrial protection policy </li></ul><ul><li>Concentrated R&D expenditure (DSM, Akzo-Nobel, Philips, Shell, Unilever) </li></ul><ul><li>The textile industry contributes 0.34 percent of total industry R&D expenditure </li></ul><ul><li>Chemical and equipment industries are the major source of information concerning innovation trends </li></ul><ul><li>Textile contributes 60% of the industry population with technical textile producers being the most innovative ones. </li></ul>
  44. 44. Evolution towards maturity
  45. 45. Evolution towards maturity maturity Dematurity? <ul><li>Textile companies dominate the industry (60%) </li></ul><ul><li>Bipolarity of structure </li></ul><ul><li>Agglomeration of retailers </li></ul>Company closures <ul><li>Increased concentration, the most concentrated in Europe up to 1980 </li></ul><ul><li>Decreased employment and increased labour costs </li></ul>Structural Change <ul><li>Clothing production largely disappears </li></ul><ul><li>Relocation to North America and Eastern Europe </li></ul><ul><li>Production relocation for high segment markets </li></ul><ul><li>Merger and acquisition continues </li></ul><ul><li>Begin a rapid decline due to uncompetitive labour costs </li></ul><ul><li>Production relocation to Belgium for low-mid segments </li></ul><ul><li>A wave of merger and acquisition </li></ul>Intensified competition with Japan and Britain over Indonesian markets Begin to compete with Japan over markets in Indonesia Competitive Change <ul><li>Exploitation of high added value technical textiles </li></ul><ul><li>Growing market in technical textiles </li></ul><ul><li>Losing colonial markets </li></ul><ul><li>A number of companies begin to shift to interior textiles and consumer technical textiles </li></ul><ul><li>Severe decline in Indonesian market share </li></ul><ul><li>Growing domestic and international markets </li></ul>Losing market protectionism in the Dutch colony of East Indies Market Change <ul><li>Economic slow down 2001-2003 </li></ul><ul><li>MFA is abolished in 2005 </li></ul><ul><li>Rapid decline continues </li></ul><ul><li>Extensive restructuring following MFAs </li></ul><ul><li>Increased labour costs </li></ul><ul><li>Early rapid decline </li></ul>Preferential market agreement with the East Indies (Indonesia) was terminated in 1870. Trend in the Italian textile industry 1990’s – 2000’s 1970’s – 1980’s 1950’s – 1960’s 1930’s-1940’s 1900’s-1920’s Year
  46. 46. Ten Cate, NV <ul><li>One of the largest textile manufacturers in the country </li></ul><ul><li>H. Ten Cate Hzn & Co was established as a linen merchant in 1704 in Almelo, Twente region </li></ul><ul><li>Export to the Dutch colonies was the primary markets </li></ul><ul><li>It has undergone two major transitions which transform the company from a linen to a high tech textile manufacturer for technical uses </li></ul><ul><li>The third transition is underway which may disrupt the existing production competence and markets </li></ul>
  47. 47. Performance
  48. 48. Innovativeness <ul><li>Performing distant search </li></ul><ul><li>Setting industrial trend to shift to higher added value textiles </li></ul><ul><li>Performing path breaking change & continuous strategic alignment involving: </li></ul><ul><ul><li>emerging technologies and markets, </li></ul></ul><ul><ul><li>a combination of internal and external assets to exploit opportunities </li></ul></ul><ul><li>Active in the EU R&D programmes </li></ul><ul><li>Engage with university research centres </li></ul><ul><li>Fundamentally entrepreneurial by which it shapes business ecosystems </li></ul>
  49. 49. Technology & market transition
  50. 50. Path breaking change and continuous alignment <ul><li>Opportunity identification in emerging markets </li></ul><ul><li>Rapid learning process </li></ul><ul><ul><li>Technology, market, distribution system, consumers </li></ul></ul><ul><ul><li>Recombination of assets/factors of production </li></ul></ul><ul><li>Development </li></ul><ul><ul><li>Internal development </li></ul></ul><ul><ul><li>Actively engage with national, regional and EU research programmes </li></ul></ul><ul><ul><li>Acquisition to complement or reinforce internal technical capability/capacity </li></ul></ul><ul><li>Establishment </li></ul><ul><ul><li>Market expansion and product/technology refinement </li></ul></ul><ul><li>Divestment </li></ul><ul><ul><li>Declining businesses </li></ul></ul>
  51. 51. Patent
  52. 52. DISCUSSION
  53. 53. Industrial maturity <ul><li>In terms of process technology, maturity began in the late 19 th century </li></ul><ul><li>Industrial maturity occurs in different periods in two countries </li></ul><ul><li>Process towards maturity in two different countries appears to follow different evolutionary paths: </li></ul><ul><ul><li>Different primary markets </li></ul></ul><ul><ul><li>Different industry structures </li></ul></ul><ul><ul><li>Different competitive environment </li></ul></ul><ul><ul><li>Different opportunities </li></ul></ul><ul><ul><li>Different trade policies (liberal and protectionism) </li></ul></ul><ul><ul><li>Different historical background </li></ul></ul>
  54. 54. Maturity-trap <ul><li>Active inertia </li></ul><ul><li>Local search & local preferences </li></ul><ul><li>Process innovation by adopting the latest equipment </li></ul><ul><li>Existing markets </li></ul><ul><li>Acquisitions to expand capacity and customer base </li></ul><ul><li>A rather static competence </li></ul>TEXTILE CLOTHING INDUSTRY Active inertia Local search Innovative culture Industrial trend Government policy Historical Legacy Customers Suppliers Distributors Competitors Marzotto
  55. 55. Marzotto-competence statics Yarns and textile production and technology Cloth making production Luxury brands High quality yarns and textile production and technology 1985 2005: Demerger 1836 1980 2005 Will continue to remain in the same markets, Expansion to emerging Economies i.e. China, Russia, India Maturity trap 1993: Relocation and rationalisation
  56. 56. De-maturity Emerging processing technology Customers Suppliers Ten Cate Distributors Competitors Innovative culture Industrial trend Government policy Historical Legacy TEXTILE-CLOTHING INDUSTRY Geotextiles Technical components Protective clothing Artificial grass Armour Emerging markets New materials Synthetic fibres High performance fiibres Composites Advanced, nano materials Advanced chemicals Non woven Functional digital printing New Distributors New Competitors Entrepreneurial, dynamic capabilities Creating new industrial boundaries
  57. 57. Ten Cate-competence dynamics Textile production and technology Technical textile technology and chemical processes Polymers Composite materials 1974 1841 1964 1987 Functional materials 2004 Dematurity Developments on core concept, engaging emerging technologies, potentially disrupt existing production system and market-technology linkages
  58. 58. Evolution of Technology Transilience High High Low Low Impact on production system Impact on market linkages De-maturity De-maturity Maturity Architectural phase Niche creation phase Revolutionary phase Regular phase Marzotto Marzotto Ten Cate Ten Cate Ten Cate Ten Cate
  59. 59. CONCLUSION <ul><li>The EU efforts to de-mature the textile industry through technological innovation by supporting revolutionary R&D programmes should be accompanied by social innovation </li></ul><ul><li>Combination of the two types of innovation are fundamental to break away from maturity-trap </li></ul><ul><li>Advances in the textile industry have to be complemented by advances in supplier industries and market industries </li></ul><ul><li>Firms have to develop dynamic capabilities that are fundamentally entrepreneurial in the process de-maturity </li></ul><ul><ul><li>Distant search; international networks </li></ul></ul><ul><ul><li>Path breaking changes & continuous strategic allignment </li></ul></ul><ul><ul><li>Recombination of assets & cospecialisation </li></ul></ul><ul><ul><li>Constant change, innovation as a moving target </li></ul></ul>